More Pay Freeze: Bad Politics, Worse Policy

I was a little worried about the post I wrote yesterday on President Obama’s pay freeze. After all, he announced the freeze a few days back — maybe it was all talked out by the time I got around to it? Turns out that wasn’t the case.

I consider The Washington Post‘s Ezra Klein to be one of the best bloggers around — the way he takes complicated policy minutiae and consistently distills them into engaging, highly informative masterpieces is truly stunning. And the best thing about Ezra is that, while he is unapologetically liberal, he’s not a hack. He’s genuinely more interested in good policy than political ideology — and while he believes liberal solutions to problems are generally more effective, he’s open-minded and intellectually honest enough to consider ideas from all sides. In other words, he’s pretty much my hero (if you couldn’t already tell.)

So wasn’t I surprised when, at 2:06 p.m. MST today, the great Ezra Klein posted this excellent piece basically articulating the same argument I made yesterday — that the Obama administration is being played like a fiddle by the Republicans because they don’t know how (or just flat-out refuse) to negotiate in a way that’s politically advantageous. Of course, he did the argument far more justice than I did — and wrote it a thousand times better — but it’s still kind of fun to quasi-scoop your idol every once in a blue moon. Either way, Ezra’s post is definitely worth your time and then some.

After reading Ezra’s thoughts and sleeping on mine from yesterday, I remain absolutely convinced that the administration’s unilateral pay freeze is horrible politics — but, even worse than that, it’s also terrible policy.

If, as the White House has stated early and often, your chief economic goal is to get as much capital flowing into the market as possible and to get as many Americans as possible spending money at businesses that will then turn around and create jobs here at home, then this policy is a massive failure.

Federal workers are just like any other American — they work for a living, they collect their paycheck, and then they spend their paycheck consuming goods and services. They are, in a sense, living and breathing little economic stimulants, just like every American worker with some cash in his pocket. The only difference? They just happen to work for the government instead of McDonald’s or FedEx or some other privately owned business.

Does that mean their money isn’t good? Does that mean their consumption won’t put dollars in the coffers of American businesses that can then use the additional revenue to hire new workers? Of course not.

We need these people to have that discretionary income now more than ever. We need them infusing that money into the market via consumption. We need them providing revenue for the private sector that will help create permanent, well paying jobs. To be brief, now is not the time to be skimping on anybody’s Christmas bonus.

I understand the flipside of the argument, too. We’re massively in debt. The federal government is carrying an annual operating deficit of about $1.2 trillion. This is unacceptable, as it presents a huge problem for the long-term financial stability of the country.

Believe me, I get it. I’m as big a deficit hawk as anyone. We need to fix it — but a federal pay freeze isn’t going to do the job. This policy is going to save the government approximately $5 billion over the next few years, which is practically nothing in the face of a projected $1 trillion budget deficit. It’s a miniscule drop in the clichéd figurative bucket.

I would love nothing more than to see both parties get serious about deficit reduction by, you know, doing the stuff that will actually work — reforming Social Security and Medicare, eliminating excess defense spending, restructuring our tax system, etc. Freezing salaries for federal employees isn’t one of those effective options. It just makes life a little harder for a lot of middle-class families and restricts the stimulative flow of capital into the markets — all without seriously tackling our deficit problem. It’s nothing but a symbolic gesture, and a bad one at that.

That’s not something the economy, the administration, or the American people can afford right now.